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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: Steve Tauscher who wrote (18657)	4/8/1998 6:26:00 PM
From: Jacob Snyder	Read Replies (1) \| Respond to of 70976

Asia Recovery Unlikely to Start Until Next Year, Says OECD An INTERACTIVE JOURNAL News Roundup April 8, 1998 Economic recovery in Asia isn't likely to begin until next year, and serious reforms are necessary before investors regain confidence in the region, said the Organization for Economic Cooperation and Development in its annual Economic Outlook report, released Wednesday. The slump has depreciated currencies and punctured share prices, shrunk economies and weakened bank balance sheets, the report said. Credit is tight, inflation is rising and investors are unwilling to commit money despite an apparent easing of the crisis, OECD said. The Paris-based group of the world's wealthiest countries predicted that the problems of Asia's banks are likely to worsen, with short-term interest rates high and property values continuing to fall. Domestic demand is down due to adverse shifts in terms of trade, declines in private sector net worth and increases in the cost of capital or, in extremely bad cases, the unavailability of capital. Indonesia and Thailand were in the worst shape, with Malaysia not far behind, it said. Even Singapore and Hong Kong, whose currencies have been least touched by the regional crisis, are witnessing economic slowdowns, and banking systems and trade flows were strained, the report said. Indonesia's crisis had led to a "virtual financial paralysis in the private sector," the report said. Defaults "are likely to more than wipe out the capital of the banking sector," it said. The key to recovery for Indonesia is stabilizing the currency and restoring investor confidence. That will require more structural reforms along the lines of the country's draft bankruptcy law and adhering to the International Monetary Fund's stabilization program. "However, given the depth of the financial and economic problems that now exist, the downturn is likely to be especially severe and prolonged without timely actions being taken by the authorities," the report said. In Thailand, industrial production was down sharply at the end of 1997. Domestic demand is likely to fall further because of declining property prices. Malaysia is also at risk from a large current account deficit, a property sector vulnerable to contraction and banks whose capitalization and problem-loan levels are only slightly better than Thailand's, the report said. China has its own problems, such as rising unemployment as it proceeds with state enterprise reform. The OECD said external pressures from the regional crisis aren't going to help by slowing investment inflows and potentially putting the government's target for gross domestic product growth for 1998 in jeopardy. The OECD predicted that slack in Japan's economy would continue to increase for some time, putting downward pressure on wages and prices. Return to top of page Copyright c 1998 Dow Jones & Company, Inc. All Rights Reserved.